Newmont to Build Suriname Gold Mine for as Much as $1 Billion

Newmont Mining Corp., the largest U.S. gold producer, approved construction of the Merian project in Suriname at a cost of as much as $1 billion, marking the first go-ahead for a new mine of its size since gold plunged last year.

Newmont expects the Merian mine will produce 300,000 to 400,000 ounces a year and is expected to start up in 2016, the Greenwood Village, Colorado-based company said in a statement. The total capital investment will be about $900 million to $1 billion, Newmont said.

The mine will have so-called all-in sustaining costs of $750 to $850 an ounce in the first five years, which compares with Newmont’s total average of $1,104 last year.

“This decision marks an important milestone in our portfolio-optimization process,” Chief Executive Officer Gary Goldberg said in the statement. “We have divested nearly $800 million in non-core assets to help fund the next generation of lower cost projects in our portfolio.”

Gold’s 28 percent plunge last year, the most in more than three decades, spurred producers including Barrick Gold Corp., the largest gold miner, to sell less-profitable mines, rein in spending and delay expansions. Newmont has sold smaller assets in Nevada and Australia, as well as holdings in Canadian Oil Sands Ltd. and Paladin Energy Ltd.

Equity Stake

The government of Suriname has an option to earn a 25 percent fully funded equity ownership stake, according to the statement. Newmont said it plans to fund its share of development costs through available cash balances and projected cash flows.

Newmont also reported a second-quarter profit excluding a tax-valuation allowance and other one-time items of 20 cents a share. That compared with the 19-cent average of 18 analysts’ estimates compiled by Bloomberg. Sales rose to $1.77 billion from $2.02 billion, less than the $1.79 billion average estimate.

The company increased its forecast for gold production this year to 4.7 million to 5 million ounces, from a previous range of 4.6 million to 4.9 million ounces, and said costs will be lower than previously forecast.

Newmont, which operates in the Americas, the Asia-Pacific region and Africa, is among producers focused on cutting costs amid lower gold prices. The company was also in discussions this year to be acquired by Canadian rival Barrick before the talks disintegrated in April.

Newmont’s average cost in the second quarter was $1,063 an ounce of gold, compared with $1,283 a year earlier and the $1,135 average of three estimates compiled by Bloomberg.

Second-quarter gold output rose to 1.22 million ounces, compared with 1.17 million a year earlier and the 1.15 million average of four estimates. Newmont also produced 20,200 metric tons of copper in the period.

Gold averaged $1,290 an ounce on the Comex in New York in the second quarter, 9 percent less than a year earlier and 0.3 percent lower than the first quarter.

Newmont Mining Corp., the largest U.S. gold producer, approved construction of the Merian project in Suriname at a cost of as much as $1 billion, marking the first go-ahead for a new mine of its size since gold plunged last year.Newmont expects the Merian mine will produce...